'Tax in the Cloud' - KPMG paper

The following is a short extract from KPMG's paper on Tax in the Cloud. I'll be reading it later today for a news piece in IT Zone, but would be interested to know if anyone in this group has read it yet, and what you make of it. FUD? A shameless play for some extra advisory work, or some important considerations that may shape how businesses and accountants view Cloud technology, the business case and planning implications?

I know that on point three, HMRC's audit team have been itching to gain real time access to business accounting systems for years (or perhaps API feeds of summary data)? Has anyone in this forum grappled with that concept yet?

Meanwhile, here's what KPMG has to say:

"The growth in the use of Cloud services to replace traditional IT service provision is rapid, and accelerating. From a tax perspective – this means change. Business models are evolving and they are changing to fit in with how the Cloud is actually developing. KPMG have put together this briefing paper which covers a number of direct and indirect issues, challenges and opportunities that can arise out of utilizing Cloud computing. In essence the Cloud brings with it:

Significant tax issues for both parties in a Cloud supply arrangement, providers and purchasers, and these are multiplied when the transactions are cross-border.

An uncertainty around the tax implications. Often, the tax impact is not fully considered at the time that the transition to a new Cloud delivery model is being planned and executed. Tax can influence the long term outcomes of planned new Cloud projects, and should be included in any business case.

Additional scrutiny from Tax authorities who are becoming increasingly aware of the tax implications of the switch from traditional IT service provision and the potential for tax leakage.

Let us know what you think of the rest of the report - any comments may be picked up and quoted for the benefit of the wider AccountingWEB readership.

Don't forget that elements of a SaaS system (x-tiered) can be located anywhere on the globe - i.e. for 3-tier - application front end=Gibraltar, webService aspect=India, database=USA. So which part are they talking about - or all of them?

The one paragraph that raises questions is:

'.. Can the end user keep any of the physical property in perpetuity once the subscription ends? ..'

This is interesting because pure data without the 'front end' application to access it is pretty useless.

A desktop app can be used to access the relevant data long after the application has become out of date

The nature of SaaS is that one always runs with the latest application & data structure (so historic data will always have the current structure - single Db)

Therefore in order to provide 'indefinite' future support for users who have stopped their subscription the SaaS application must employ a form of 'checkpoint restart'

i.e. each 'expired' users data must be flagged for a point in time and the appropriate 'historic' elements of the SaaS application must be included at run time so that the user has precisely the same functionality maintained in perpetuity - ouch !

Unless of course one gives them the current functionality but that may be unachievable with application updates over time

Also 'expired' users must be allowed to access their historic data in perpetuity on a read only basis

OR

Perhaps there is another way? - over to the providers to explain how this is managed in their own situation